I still can't figure out why this will trade at a large premium to MQD+ arrears (~ $4/share ) after the refinance is done. As a GP majority holder, Murray can offer $4 to convert the subs. That will raise his stake to 55% in the LP. What will stop him from buying the LP at say $2.30 (current price - mqd+arrears) now that he holds the majority at both GP and LP level ?

Why will the market value it in the multiples of DCF when the end game is a buy out? Can the conflict committee stop him from doing that?

Here is a back of the envelope calculation that has me holding on to my shares and very positive about returns going forward (picture of excel sheet included)

Setup:

-Current common unit arrears are $1.86 and go up $.3375 every quarter there is no distribution

-If commons are paid $2.203 per unit after all arrears are paid, the subs convert to commons

-IDRs don't kick-in until distributions are over $2.203 per year.

If you build a simple model that assumes the second half of 2016 will be the run rate of FELP's business and assume the refi will save on interest you get something like:

EBITDA: 350

Maintenance Capex: 50

Interest Expense: 85

DCF :215

If you assume FELP distributes the MQD (1.35) this year to commons and retains the remainder of DCF to fund the $2.203 payment required for sub conversion, it will take until 2019 for Murray's subs to convert. AND DCF of 215 is not enough for any IDRs to be paid to the GP assuming there will be roughly 140 common units in 2019.

If I assume a 10% required rate of return, and no growth in the 215 DCF, this situation makes FELP sub units worth roughly $12 today and common units worth roughly $18

On the other hand, if Murray could somehow come up with the money to take out the LPs, with the 10% required rate the value of FELP's cash flow stream would be worth $15 per share in the above scenario.

(Using a 15% required rate of return gives $12.82 for commons today, $7.45 for subs and $10.60 for the FELP CF stream)

If Murray offered to buyout most public common LP holders, I'm sure they would sell for something like $12, but who knows what the Reserves Group would sell their 46.8 million shares for...And I don't know how Murray would fund a buyout.

This makes me think, if Murray never buys out the common LPs, he's a long way from making money (assuming the 215 DCF number). I guess he could have recently paid 15 million to control the GP in order to save on Murray transportation costs or terminal access or something like that, but if he really thinks the IDRs have value then FELP shares are worth at least 3x their current price at some stage ($2.2 at 10x multiple)

Does anyone know anything about Murray Energy's tax situation? Like does it make sense for Murray, at some stage, to drop down all their assets into this MLP in order to make Murray more tax efficient?

What would be the cynics view of why Murray recently paid 15 million to control the GP, is there anyway he would fleece common holders to recover his original investment where we would be unable to stop it? I seem to doubt it given Reserves Group still has 46.8 million common units